It’s no secret that the cryptocurrency business has been a hot topic not only among long-standing investors like Elon Musk and now to that guy next door. Kenya is reported to have the biggest share of people who own crypto in Africa with over 4 million of them according to the United Nations Conference on Trade and Development (UNCTAD). The Crypto market which is known for its quick returns and in equal measure big losses have been a topic of concern among Kenyans. In many ways, a lot of people fail to understand what crypto is, how it works, and everything around it. To many, it’s just an elaborate scam waiting to explode.
From my average Harvard professor level of research and a talk with Sharon and Bryson; some of the crypto-traders, here is what you should know.
First things first, technology is taking over and has been for a while. And just as everything else is going digital, so is money/currency. A cryptocurrency is a digital, encrypted, and decentralized medium of exchange. Unlike the Kenyan shilling, there is no central authority that manages and maintains the value of a cryptocurrency. Instead; these transactions are broadly distributed among other users via the internet.
How does cryptocurrency work?
The distributed public ledger therefore, is called a blockchain. It is a record of all transactions updated and held by currency holders.
Coins are the units of cryptocurrency. One can generate coins for themselves by using computer power to solve complicated mathematical problems. Users can also buy the currencies from brokers, then store and spend them using their digital wallets.
In Kenya today, you can buy, trade, exchange, hold and store cryptocurrencies as long as you do not break any existing laws. However, the Central Bank of Kenya strongly advises against trading in it.
How Many cryptocurrencies are there?
I bet that the mystery is now unmasked right? Well, there is more. There are thousands of cryptocurrencies. They are however a few that are referred to as trusted coins. These are those coins that belong to a trusted cryptocurrency network. An example of a cryptocurrency network is Bitcoin. Its coin is referred to as the BTC. When joining crypto, it is up to you to decide which cryptocurrency to trade in. But of course, since my readers deserve the best, I narrowed down the main factors to consider.
It is the cryptocurrency’s timeline and a person’s risk tolerance
Thorough research is required on the particular coin’s circle of performance over a period of time. You do not want to invest in something that is dying.
On the other hand, with risk tolerance, the more risk you are willing to take, the greater the reward you stand to gain. The cryptocurrency’s market cap (a market cap is its current value times it’s circulating supply) will guide you in measuring the risk and the reward. Most of the cryptocurrencies in the top ten by market cap could be considered low-risk investments. Those are Bitcoin, Ethereum, Tether, USD Coin, Binance Coin, Ripple, Cardano, Binance USD, Solana and Polkadot. They are likely to double or even triple in price in a bull year and are most likely to be around for many years.
A rule of thumb: the smaller the market cap, the more potential that a cryptocurrency has to grow regardless of its dollar value because it takes less money to increase its value. However, the further you move down the list of market cap performance the more risky the investment becomes because it takes less capital to crash it as well.
It is advised though to stay away from crypto that isn’t among the top 200 by market cap because most of the quality ones are established. Beyond that, it’s more of gambling. (N/B: not financial advice).
Why is a bitcoin/cryptocurrency valuable?
You are probably asking yourself at this point, why should I even? I mean nobody likes stressful situations; I am sure. Well, the value of cryptocurrency is established by what it can do. The BTC (from Bitcoin) coin for example; has a similar economic profile to that of Gold. Its high value is attributed to its limited supply hence high demand.
How to buy cryptocurrencies in Kenya
And now, onto the real hard nut to crack. How do we buy cryptocurrencies in Kenya? Truth be told, it’s modern Kenya, where frauds and scams are taking over.
First things first, choose a platform:
Getting coins in Kenya for your wallet is not an easy task though. When comparing different platforms, consider which cryptocurrencies they offer, what fees they charge, their security features, storage and withdrawal options, and any educational resources offered.
In general, you can choose between a traditional broker or a dedicated cryptocurrency exchange. On the traditional broker, a familiar one is the Blockchain Association of Kenya which brokers bitcoin and digital assets locally.
Types of cryptocurrency exchanges in the market include Coinbase, Binance, Etoro, and Paxful.
“My trusted exchange platform is Binance. You’ll find buyers and sellers there. Plus, some of the exchanges have collapsed in the past and people’s money has been lost. But Binance has been long-standing.” Said Bryson.
Secondly, is funding your account.
Yeah, well it is inevitable to spend to earn right?
So, once you have chosen your platform, the next step is to fund your account so you can begin trading. The accepted payment methods and time taken for deposits or withdrawals differ per platform. Equally, the time taken for deposits to clear varies by payment method.
And now get started by placing an order
You can place an order via your broker’s or exchange’s web or mobile platform. The best option for you will depend on your investment goals and risk appetite.
“One thing I have learned is, to not invest a lot into it without experience. When I invest a thousand shillings, which I do often, I can get a profit of up to five thousand shillings.” Sharon.
How useful are cryptocurrencies’?
So, you’ve now invested and secured your crypto coins, how useful can they be to you?
It’s useful in making Online and cross-border payments. Well, you could send them to a friend or family member wherever they are in the world. Bitcoin, for example, works as a payment network, so anyone can instantly make online payments and send or receive money from abroad with minimal fees compared to the traditional banking system.
One can trade Digitally. Alternatively, you can always settle for becoming a digital asset dealer, broker, or agent. Cryptocurrencies are just like commodities only that they are digital so and easier to trade.
The choice to Wait And see. Your last option, of course, would be to just hold on to your assets and wait for the value fluctuations. At that instance, you can then immediately look for buyers and sell them for the standing price which means you get profits compared to the amount you spent buying yours.
Cryptocurrency has grown so fast and we’ve seen millionaires off of it. Especially young people and small traders. And in as much as you may not be interested, it is a crucial thing to learn as it may be the future of money/currencies.
How safe is cryptocurrency though?
In its fairly complex, technical process, the resulting digital ledger of cryptocurrency transactions is hard for hackers to tamper with.
In addition, transactions require a two-factor authentication process. For instance, you might be asked to enter a username and password to start a transaction. Then, you might have to enter an authentication code sent via text to your cell phone.
Its biggest downside, however, and very important to note, is that;
Unlike government-backed money, the value of the digital currencies is driven entirely by supply and demand. This can create wild swings that produce significant gains for investors or big losses. And cryptocurrency investments are subject to far less regulatory protection than traditional financial products like stocks, bonds, and mutual funds.
Together with that, the rising inflation rate has forced some investors to withdraw which has significantly affected the business.
While Sharon has been in the cryptocurrency business for two years, Bryson on other hand has traded actively for 18 months. They both say it is their full-time source of income. However, they advise to only trade with an amount that one can afford to lose, given how volatile the market is.